The Figure Given Below Represents a Firm in a Market

question 34

Multiple Choice

The figure given below represents a firm in a market characterized by many buyers and one seller.MC is the initial marginal cost of the seller.MC' denotes the marginal cost inclusive of the $1 transaction cost.On the other hand, buyers incur a transaction cost worth $2 represented by the vertical distance between D and D'.MR and MR' represent the marginal revenue curve corresponding to the demand curves D and D' respectively.


-Refer to Figure .Suppose the seller incurs an additional cost of $1 per unit of output to reduce the transaction costs of the buyers to zero.How will the profit earned by the seller change?

• A)The firm's profit will increase by $0.62.
• B)The firm's profit will increase by $2.6.
• C)The firm's profit will remain unchanged.
• D)The firm's profit will decrease by $6.2.

Understand the process of closing accounts including the effects on the capital account.

Determine the effects of closing entries on net income, net loss, and individual account balances.

Comprehend the purpose and procedure of closing entries in the accounting cycle.

Understand the treatment of withdrawals in relation to the capital account.

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Definitions:

Fair Value

The estimated market price of an asset or liability, reflecting the price at which an orderly transaction would take place between market participants.

Limited Partnerships

Limited partnerships are business entities with one or more general partners managing the business and limited partners who provide capital but have limited liability.

Corporations

Legal entities that are separate and distinct from their owners, established to conduct business, earn profit, and be endowed with legal rights.

Adjusting Entries

Journal entries made at the end of an accounting period to update accounts for accruals and deferrals not yet recorded through daily transactions.